The Equity Analyst Team is a student organization within the Johns Hopkins Carey Business School. This exclusive investment management organization is designed to create graduate students that bring both hands-on experience and theoretical knowledge to their future employers. The members are hand-picked, interviewed, and put through a rigorous program.

Wednesday, September 21, 2011

As an owner of the business you are better off with a share buyback than dividends giving that your stock is undervalued. This will be a super good option when the stock is undervalued. A lot of research shows that shareholders are better off with share buyback. As simple as this, if the company P/E ratio is 12 and it dose share buyback, the shares outstanding will be lowered after the buyback and hence will increase the P/E. As a result, you, and investor, make more money through stock appreciation than you would do through the dividends payout, because you are dealing with P/E multiple of 12. In addition to the tax advantage and the perception of the market toward your undervalued stock. Share buyback is showing under the name "Treasury Stock" at the Owner's Equity in the Balance Sheet. And they are negative in the Balance Sheet. And in many cases companies list them as they describe how much dividend they paid right after the balance sheet or somewhere in the 10-k report.

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The opinions expressed here are solely that of the author. This is not intended to be relied up as a forecast, research advice, recommendation, or solicitation to buy or sell any securities. The opinions expressed are as of the date above and are subject to change. The information is derived from sources deemed to be reliable, and are not guaranteed as to accuracy. The information contained in this paper is based upon or derived from information generally available to the public from sources believed to be reliable. Past performance is no guarantee of future results. Reliance upon information in this material is at the sole discretion of the reader.